Fintech Nexus Newsletter (October 31, 2023): When It Comes To APP Fraud (some) Banks Pay The Price

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Authorized push payment fraud has risen across the global financial sector.

For consumers, this can be a devastating blow, wiping out savings and knocking the livelihood of vulnerable individuals. Many hold banks responsible for the reimbursements to the victims of such crimes.

UK supervision of bank reimbursements of APP fraud victims has been contradictive. On the one hand, regulators started requiring that banks issue reimbursements from June 2023 in a bid to protect customers.

However, in July, the Supreme Court ruled that Barclays would be held responsible if the fraudulent payments were authorized, setting a contradicting precedent.

So, it seems it’s been left largely to the banks to decide, resulting in a spectrum of reimbursement probability.

For example, if you are a customer of TSB, you have a 94% chance of having that APP scam payment reimbursed in full. If you are a customer of Monzo, however, that dropped to 6%.

It’s a nuanced issue that will likely double in the next three years, so an industry-wide solution is probably in order.

Yes, the customer technically authorized that payment, but humans make mistakes. APP fraud scams pull at the human nature of the customer, manipulating them to make that transfer to what they think is a legitimate payee. For some customers who are more vulnerable to these tricks, the payment provider is their only line of defense.

In lieu of a solution that stops the crimes from happening in the first place, bank reimbursement is the only source of protection.

FEATURED

Monzo Bank Tops UK Lenders Targeted in Digital Payment Frauds

www.bloomberg.com

Monzo Bank Ltd., Starling Bank Ltd. and Metro Bank Holdings Plc are the UK lenders most impacted by online fraudsters who trick customers into sending a payment to an account outside their control.

FROM FINTECH NEXUS

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Isabelle is a journalist for Fintech Nexus News and leads the Fintech Coffee Break podcast.

Isabelle’s interest in fintech comes from a yearning to understand society’s rapid digitalization and its potential, a topic she has often addressed during her academic pursuits and journalistic career.

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